CESR launches consultation programme for MiFID

Today's announcement by CESR launches a consultation on the details of CESR's work programme for a new MiFID Level 3 Expert Group, and provides all market stakeholders with the opportunity to indicate where they would find CESR guidance and consistency amongst supervisors, particularly helpful. Comments are welcomed by 11 September 2006 and can be submitted on CESR's website (as is the usual practice under consultations).

Briefly, CESR has identified four categories of issues of Level 3 work under MiFID, on which it could be helpful for supervisors to ensure convergence in their practices, these include:

• Technical issues of operational importance where consistent implementation of the Level 1 and Level 2 legislative texts need to be achieved before their implementation to provide market participants with pan European strategies with greater certainty. These issues largely relate to the functioning of the passport of investment firms and regulated markets. Areas of work are proposed for consultation in the work programme (set out in page 7-9) but include for example amongst others, calculations relating to market transparency (such as the definition of liquid shares and "block sizes") and publication and consolidation of market transparency information.
  
• Other issues of a technical and operational nature, aimed at ensuring a convergent implementation of MiFID, not all necessarily to be tackled before the date of implementation of the new legislative framework. Amongst others, priority is given in the work programme to best execution where for example, it may be considered useful to develop a convergent view amongst supervisors on, the best execution requirement for non-equity markets in particular and, clarifying interpretations of the execution performance which is also identified.
  
• Work to foster greater cross-sector convergence is also proposed and will be conducted with CEBS and CEIOPS. Examples of such work include outsourcing and a review of internal governance of intermediaries to ensure there is no unnecessary duplication. This joint work is set out in page 6 of the work programme.
  
• A number of reports or reviews are also anticipated in the MiFID legislative texts for example, a review of the possible extension of the pre- and post-trade transparency regime to transactions in classes of financial instruments other than shares. A comprehensive list of these reports and reviews are set out in the work programme on page 5. It is very likely that CESR will be asked to advise the European Commission on a number of these.

The criteria to select work that will fall under each category of the MiFID work programme has been determined by CESR on the basis of broader criteria developed by CESR in establishing its work priorities.

The 2006 Supervisory Convergence Report sets out the tests CESR will apply to undertaking further work in any area and the principles established in this report apply to the MiFID and should therefore be taken into account by market participants if they wish to propose any further priorities in response to this consultation.

In the light of the changing emphasis of CESR's work on MiFID, which is now focused on ensuring a seamless application in the day-to-day practice of the rules across Europe by CESR Members rather than providing technical advice on implementing measures, CESR has decided to dissolve the previous three Expert Groups and its MiFID Steering Group which prepared and submitted its Level 2 technical advice on implementing measures. In its place, CESR has established a new single MiFID Level 3 Expert Group that will undertake work to deliver supervisory convergence in the day-to-day application of the legislation (i.e. Level 3). This group will be chaired by Arthur Philippe, Director and member of the Management Board at the Commission de Surveillance du Secteur Financier, Luxembourg's securities supervisor. The secretariats' rapporteur of this group will be Carlo Comporti, Deputy to the Secretary General at CESR and Director of Markets and Intermediaries.

There will be two working sub-groups reporting to the MiFID Level 3 Expert Group:

• the Intermediaries sub-group, chaired by Antonio Carrascosa, Director General at the Comision Nacional del Mercado de Valores (CNMV), Spain's securities supervisor. The rapporteur of the intermediaries sub-group will be Diego Escanero, Senior Officer at CESR Secretariat
• the Markets sub-group, chaired by Hans Wolters, Head of Policy at the Autoriteit Financiele Markten, Holland's securities supervisor. The rapporteur of the markets sub-group will be Jari Virta, Senior Officer at CESR Secretariat

The MiFID Level 3 Expert Group aims to facilitate a smooth and consistent implementation of the new regime. In addition, to the proposed work programme which is developed for this purpose, the MiFID Expert Group will also foster supervisory convergence by providing a close network of colleagues which will enable Members to seek each others advice and share their experience in respect to operational issues arising out of the implementation of MiFID, where it is necessary to address certain issues at a European level.

As is often the practice, CESR will form a MiFID Consultative Working Group which will draw together technical experts from the markets and types of firms affected to provide advice on the technical practicalities of the guidance developed under the work programme. Its composition will be made public on CESR's web page. The members of the group are proposed by the each CESR members and the final list of experts is developed to ensure practical technical experience of each area for work proposed in the work programme is included.